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Sunday, March 23, 2014

My Best & Worst Trades of 2013

It's almost April. 2014 has not been bad so far for stocks and the overall trend of the stock market is still, up. The "bull run" is five years old, starting in 2009. 2013, for me, was my best year investing in stocks. My 1-year performance was +48.2% in my Brokerage account, and +34.6% in my Roth IRA account. Not bad, huh? I can't say the credit for this has to do entirely with my stock selection skills, although this did play a role. Getting overconfident or trusting in my abilities to evaluate the stocks of companies I want to buy, is not part of my investment strategy. It would be foolish to think you're some sort of stock picking genius. Not to mention, a sure recipe for disaster. Much of my success, like much of the success other people in the market had last year, had to do with it being something called a, "beta" market. I write about a beta market in my e-book, Common Core Money (due out very soon). Anyway, what this really means is that last year was all about stocks going up together, and coming down together, and for most of the year, they went up! So, even a monkey at a computer could've picked a bunch of winners. I'd like to share with you my best and worst trades of 2013. Maybe you'll glean something that can help you as you invest in the stock market. A word of caution. Stock picking is risky. If you're not already doing it, I suggest you read multiple books on the subject. If you don't like to read, I suggest then that you buy a low cost, low turnover, index mutual fund, like Vanguard's Total Stock Market Index Fund (VITSX). In many cases, index funds of stocks or bonds perform just as well, if not better, than individual equities and debt (bonds).

Best Trade:

Sanchez Energy Corp (SN): +$1,262.50. I believe I learned about this company from Jim Cramer, the host of CNBC's Mad Money. I recall he had the CEO on the show. I didn't just blindly go in. I never do. I write the names of these companies down when I hear of them and do my research. If I find the "hype" to be true, I go ahead and pull the trigger. I held the stock from 3/21 to 5/2 of 2013. I bought the stock in several installments, not just in one lump sum. I must have received indications of positive momentum to give me the confidence to continue buying. Looks like I held a total of 550 shares and sold 100% of the shares from May 16 to 6/5/2013. Lesson: Don't just blindly buy in when you get a tip, follow up!

Worst Trade:

SPDR Gold Trust ETF (GLD): $-436.26. Remember Syria? Now it's about Ukraine and Russia. Before this it was North Korea. Well, in 2013, it was all about Syria. Gas was supposed to have gone up to exorbitant levels. The U.S. was figuring out what to do with the allegations of use of chemical warfare against the Syrian rebels by the "regime" of al-Assad. Gold had been falling for much of 2013 and everyone was talking about a "floor" (bottom level) being established for Gold since the previous years it had risen to crazy levels. We also had, if you recall, the big debt default scenario because U.S. politicians couldn't agree on a budget. Traditionally, when the excrement hits the fan, when it appears that all hell is going to break loose, that's when you buy Gold bullion (if you can afford it; I can't!) or shares of Gold stocks/Exchange Traded Funds (ETFs). The SPDR Gold Trust ETF was the best of breed. Being confident that weight of all of this bad news would scare investors into Gold, I bought 75 shares of GLD in two installments, on 9/25/13 (50) and again on 10/01/13 (25). Seeing that my premise (you have to have a premise before you get into a position, i.e., buy a stock) was utterly defeated, the world was not going to end or at least investors weren't going to be scared into gold in droves, I did the wise thing and sold. You have to be willing to take a loss and get out as soon as possible if what you anticipated happening, didn't pan out. I sold all of the shares on 10/11/13. It taught me one important lesson: Carlos, you don't know enough about precious metals, stick to stocks!

I hope you've enjoyed my first installment of Best/Worst Trade. See you in 2015!